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Searching for the Meaning of “Registers” in the Anticybersquatting Consumer Protection Act (ACPA)

Where outcomes depend on a word’s meaning, the first task is to define it. “Registers” which is one of the keywords in the Anticybersquatting Consumer Protection Act (ACPA), is still in the process of definition. Its statutory context provides that a domain name registrant is liable to the owner of a mark if “it has a bad faith intent to profit from that mark ... and (ii) registers, traffics in, or uses a domain name [corresponding to a mark] that ... is distinctive at the time of registration of the domain name [and] is identical or confusingly similar to that mark.” 15 U.S.C. § 1125(d)(1)(A)(i) and (ii). While “registers” appears to be self-evident, its meaning is illusive. On the East Coast it has been found to refer to all registration events, Schmidheiny v. Weber, 319 F.3d 581 (3d Cir. 2003); on the West Coast it has been taken to mean creation-date, GoPets Ltd. v. Hise, 657 F.3d 1024 (9th Cir. 2011). Schmidheiny focuses on registrant’s conduct and GoPets focuses on domain names as property rights.

Schmidheiny and GoPets have so far been the referent points for the “registers” discussion. The occasion for this essay is a new contribution to the discussion, WorkForce Software, LLC v. Workforce.com, 20 C 7365, at 1 (N.D. Ill. Oct. 26, 2021). WorkForce adopts Schmidheiny and lucidly explains why. There is also a currently pending motion before a different judge in the Northern District of Illinois that also raises the “registers” issue (Great-West Life & Annuity Insurance Company, and Empower Retirement, LLC. v. Empower Geographics, Inc., and Alex Machinis, 1:21-cv-04004 (N.D. Ill). Schmidheiny was also adopted by the Eleventh Circuit in Linen v. Dutta-Roy, 810 F.3d 767 (11th Cir. 2015. GoPets has not been adopted by any other circuits, but a district court in the Tenth Circuit has adopted the GoPets reasoning and there are several Ninth Circuit district court decisions following (as they must) GoPets in so far as they raise the property rights issue.

I will first sketch out the Schmidheiny and GoPets cases for context, and then look briefly at the Linen, WorkForce, and Empower cases to show why the conduct test does not preclude applying the property rights test. The Court in WorkForce notes that Schmidheiny and GoPets have hitherto been regarded as opposites. The argument I will be pressing is that Schmidheiny and GoPets are two sides of the same coin. They appear opposites because of 1) the different facts which dictated their outcomes, and 2) the property rights policy developed under Ninth Circuit jurisprudence. In other words, the opposing constructions of “registers” are what they are because of the facts presented, so that rather than see these two decisions as opposites, they should rather be viewed simply as two possibilities in determining bad faith. One set of facts leads to Schmidheiny and the other set of facts lead to GoPets. This, in fact, is borne out in reviewing the offspring of these cases.

First, though: What are the facts and what the holdings in Schmidheiny and GoPets?

In Schmidheiny, defendant is accused of re-registering <schmidheiny.com> and offering to sell it to plaintiff, a billionaire “ranked among the wealthiest individuals in the world by Forbes magazine.” Id., at 581. In dismissing the action, the district court found that “the plain meaning of the word ‘registration’ as used by Congress imparts to us no other meaning but the initial registration of the domain name.” Id., at 582. In reversing and remanding the case, the Third Circuit noted that “[t]he words ‘initial’ and ‘creation’ appear nowhere in § [1125(d)], and Congress did not add an exception for ‘non-creation registrations.’” Id. Further, “[t]he District Court’s rationale that ‘if Congress chose to treat re-registrations as registrations, it could have used words appropriate to impart that definition,’ is not a sufficient reason for courts to infer the word ‘initial.’ Instead, we conclude that the language of the statute does not limit the word ‘registration’ to the narrow concept of ‘creation registration.’” Id., at 583. Rather, “the word ‘registration’ includes a new contract at a different registrar and to a different registrant.” Id.

GoPets began its legal journey in a proceeding under the Uniform Domain Name Dispute Resolution Policy (UDRP) in which the Panel dismissed the complaint for <gopets.com> reasoning that since the disputed domain name was registered prior to the first use of the mark in commerce mark owner “inevitably fails.” Subsequent to the UDRP award, Hise registered 18 other “go pets” formative domain names, and he also transferred <gopets.com> to his and his brother’s corporation, Digital Overtures which is certainly a re-registration. The district held that “re-registration of gopets.com by Digital Overtures violated § 1125(d)(1),” in essence a Schmidheiny decision. The Circuit reversed and remanded on <gopets.com> but affirmed the district court’s holding that the Hises acted in bad faith, in violation of § 1125(d)(1), by registering the Additional Domains, and we affirm the award of $1,000 for each of those registrations.”

While noting that the text of § 1125(d)(1) considered in isolation does not answer the question of whether “registration” includes re-registration, it reasoned (and this is the principal difference with Schmidheiny) that,

Looking at ACPA in light of traditional property law, however, we conclude that Congress meant “registration” to refer only to the initial registration. It is undisputed that Edward Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name.

As it concerned <gopets.com> (but not the additional domain names) the Court drew from this the following conclusion

We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner. The general rule is that a property owner may sell all of the rights he holds in property. GoPets Ltd.‘s proposed rule would make rights to many domain names effectively inalienable, whether the alienation is by gift, inheritance, sale, or other form of transfer. Nothing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable. Id., 1031-32.

If domain names are property akin, say, to land then it follows that their owners cannot be divested of their rights. The Ninth Circuit has in the past pointedly analogized domain names to “staking a claim to a plot of land at the title office,” Kremen v. Cohen, 337 F.3d 1024, 1030 (9th Cir. 2003). A number of courts have affirmed that domain names are property of a certain kind, intangible property. But the Court in Storey v. Cello Holdings, L.L.C, 347 F.3d 370, 374 (2d Cir. 2003) stated that “[t]he ‘bad faith intent to profit’ element of a trademark rights-holder’s ACPA claim may be premised on the domain-name registrant’s ongoing use of the domain name. In this respect ACPA rights differ from traditional property rights in land, to which ownership of a domain name is often analogized.”

When we turn to the offspring of Schmidheiny and GoPets we find two sets of opposing facts: 1) where the evidence establishes registrant has acted in bad faith—the conduct test; and 2) where the evidence establishes registrant’s right to the domain name—the property test.

In adopting the Third Circuit’s reasoning, the Eleventh Circuit in Linen v. Dutta-Roy held that “Including re-registrations under the registration hook comports with the purpose of Congress in enacting the ACPA—to prevent cybersquatting.” This was an easy call because the facts presented were not dissimilar to Schmidheiny in that Dutta-Roy re-registered the disputed domain name in his own name that was Linen’s asset:

On April 9, 2012, Dutta—Roy’s registration of bydesignfurniture.com expired, which caused Jysk’s website to go down. Jysk immediately discovered that it did not own the registration because it was in Dutta—Roy’s name, and asked Dutta—Roy to re-register bydesignfurniture.com in its name. Dutta—Roy refused. On April 20, he re-registered bydesignfurniture.com and on April 26 he registered the domain names bydesignfurniture.org, bydesignfurnitures.com, and bydesign-furnitures.com. Id., 772

In the subsequent district court decisions of the Ninth Circuit we find that the disputes involve domain names that either predate the first use of the corresponding trademark (<airfx.com>, or are composed of common words (<freebies.com>) and phrases (<lottostore.com>) or strings of random letters (<imi.com>). None of these support findings of “bad faith intent to profit,” and all support creation-date rights

In its focused analysis in WorkForce Software, the Court highlights the differences between Schmidheiny and GoPets. Although the facts in WorkForce align with those in Schmidheiny in that bad faith is found in the re-registration and registrant’s conduct, the Court’s discussion is far broader than in any previous decision. It points out that the “[t]he Ninth Circuit’s position fails to fulfill [the purpose of the ACPA] in all circumstances,” implying that in some circumstances, it does. The purpose, as Congress explained, was

“narrowly tailored . . . to extend only to cases where the plaintiff can demonstrate that the defendant registered, trafficked in, or used the offending domain name with bad-faith intent to profit from the goodwill of a mark belonging to someone else.” S. REP. 106-140, 13. The purpose of the statute is to protect trademark holders from predatory registrants seeking to profit from distinctive marks.

The Court continues,

A case involving bad faith conduct after a re-registration leads to the same consequences [whichever test is applied]. For example, in this case, Defendants are alleged to have acquired an existing domain name that is similar to marks held by WFS and then transformed that domain’s use from a magazine to a direct competitor with WFS. The alleged misconduct and harms that followed are identical to a creation registration action: misuse of a distinctive mark and harm to WFS’s goodwill. In short, the way in which the registrant comes into possession of the domain does not change the potential harm. As a result, it is the bad faith conduct, not the definition of the word registration, which narrows the statute’s focus.

The critical insight (which I think deserves underscoring) is “it is the bad faith conduct, not the definition of the word registration, which narrows the statute’s focus.” If the same consequences follow, it makes little sense in talking about opposing constructions. The Court then takes up the dispute before it: “Having concluded that the definition of registration extends beyond the initial creation and registration of a domain name, the Court turns to the elements of a Section 1125(d) claim:

First, it is undisputed that WFS’s marks were distinctive at the time the <workforce.com> domain was transferred and re-registered with Defendants. Second, WFS has sufficiently alleged that Defendants’ use of <workforce.com> as a platform for its own employee management software is confusingly similar to its own marks. Third and finally, WFS has adequately alleged that Defendants acted in bad faith. . . . These allegations set out a plausible set of facts from which the Court can draw the logical inference that Defendants acted in bad faith.

While it may appear odd, the fact is no disputes (other than the “additional domain names” in GoPets) have been presented to any Ninth Circuit court that match the sets of facts presented in any Third or Eleventh Circuit courts. If such facts were to be presented, the policy issue test expressed in GoPets could not possibly be applicable. We know this as a certainty because the Ninth Circuit rejected Hise’s argument justifying his registrations of the additional domain names on the same bad faith grounds that the Third, Eleventh, and Northern District of Illinois have done. In other words, the policy issue only applies where the creation-date supports lawful registration and continued lawful use of the disputed domain name, not otherwise. For this proposition see DSPT International v. Nahum, 624 F.3d 1213 (9th Cir. 2010) (holding that “[e]ven if a domain name was put up innocently and used properly for years, a person is liable under 15 U.S.C. §1125(d) if he subsequently uses the domain name with a bad faith intent to profit from the protected mark by holding the domain name for ransom”); also Newport News Holdings Corporation v. Virtual City Vision, Incorporated, d/b/a Van James Bond Tran, 650 F3d 423 (4th Cir. 2011), cert. denied,———U.S.————, 132 S.Ct. 575, 181 L.Ed.2d 425 (2011).

It is with this summary of the earlier cases as prelude that I hesitate turning to the pending motion in the Empower case. First of all: What are the facts? And having digested them, what can be expected? This carries with it, I know, the great risk of being wrong, but if the foregoing analysis is correct, the outcome should conform to it. Defendant moved to dismiss the action on the grounds that

The defendants in this case have continuously owned the domain name <empower.com> since 2002. In 2014, twelve years after the defendants had been using the domain, the Great-West insurance company decided it wanted to re-brand some of its businesses using the word “empower.” The executives at Great-West made this decision despite knowing three things: (1) the empower.com domain was registered to a duly-formed and senior corporation by that name; (2) the word “empower” is a non-exclusive dictionary word; and (3) as a consequence of the wide-spread use of the word, any trademark using the word “empower” would be, in Great-West’s own words to the Patent and Trademark Office “inherently weak.”

In its answer, Plaintiff argues,

Defendants abandoned their original use and continued to renew and use the Empower Domain well after the development of Plaintiffs’ distinctive trademark rights. That is cybersquatting, and the ACPA provides a remedy. A vast majority of courts have rejected Defendants’ argument that the ACPA is limited to the facts at the point of initial registration. Rather, it creates an ongoing obligation to act in good faith.

This argument implies that the registration and holding of a domain name is contingent on its purposeful use even though the domain name predates the first use of EMPOWER in commerce. In other words, had Defendant continued to use <empower.com> for its business, there would be no claim, but because it closed or transformed its business and is offering its domain name asset for sale, its continued renewals (that are not re-registrations under the Schmidheiny analysis) violate the ACPA. There is no law to support this proposition. Defendant responded (in a capsule):

The cases which are said to “follow” Schmidheiny involve either complete “re-registration” of a domain name, an originally-registered domain name that has been transferred or acquired in a “re-registration” by an unrelated party junior to the mark in question, or pre-existing contractual obligations among the parties. None of those cases is in actual “conflict” with the circumstances in GoPets, in which the domain name in question had simply been maintained by the same party in interest since well prior to the mark in question.

For its top-most argument, Defendant urges the Court to dismiss based on statutory grounds, namely that the domain name registration predated Plaintiff’s first use of its mark in commerce. In a technical sense, Plaintiff lacks standing because the mark was not “distinctive at the time of registration of the domain name.” Only if the Court rejects this argument is it necessary to proceed with the Schmidheiny / GoPets analysis. Since there is no re-registration (renewal of registration is simply a continuation of the creation-date registration) and the domain name has been continuously held by Defendant, Defendant does not run afoul of the conduct test of Schmidheiny. Further, its continuous holding of the domain name puts it squarely under the Ninth Circuit policy of domain names as property rights.

As there is no law for the proposition that holding a domain name corresponding to a postdated mark is cybersquatting for offering to sell its asset, and as Defendant passes both the Schmidheiny and Go Pets tests (as elucidated in WorkForce), Great West’s complaint should be dismissed.

By Gerald M. Levine, Intellectual Property, Arbitrator/Mediator at Levine Samuel LLP

Information about the firm can be found on the Firm’s website at iplegalcorner.com. Mr. Levine has a litigation and counseling practice representing clients in Intellectual Property rights and management, Internet and Cyberspace issues, domain names and cybersquatting, as well as a diverse range of legal and business matters from working with client to resolve commercial disputes, to copyright and trademark counseling and registrations. He is the author of a treatise on Trademarks, Domain Names, and Cybersquatting, Domain Name Arbitration: A Practical Guide to Asserting and Defending Claims of Cybersquatting Under the Uniform Domain Name Dispute Resolution Policy. A Second Edition of the treatise was published July 2019 and is available from Amazon or from the publisher, Legal Corner Press (LCP). For inquiries to LCP write to .(JavaScript must be enabled to view this email address) or Mr. Levine at .(JavaScript must be enabled to view this email address).

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